Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liabilities whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2314) CONTINUING CONNECTED TRANSACTIONS 2017 DONGGUAN AGREEMENTS

On 10 February 2017, the 2017 Dongguan Finished Goods Agreement and the 2017 Dongguan Steam and Electricity Agreement were entered into between the Group and the Lee & Man Manufacturing Group.

Under the 2017 Dongguan Finished Goods Agreement, the Group will from time to time supply finished goods (such as test liners and corrugated medium paper) to Lee & Man Manufacturing Group for manufacturing corrugated paper packaging products in the PRC; and the Lee & Man Manufacturing Group will from time to time supply waste paper by- products and other manufacturing materials to the Group for manufacturing paper products. Under the 2017 Dongguan Steam and Electricity Agreement, the Group will supply steam and electricity to Lee & Man Manufacturing Group. These transactions are the continuation of the same transactions under the Existing Dongguan Agreements and the 2017 Dongguan Agreements have a term commencing with effect from 1 January 2017 up to and including 31 December 2019.

As the relevant percentage ratios under the Listing Rules for the Aggregate Annual Caps are, on an annual basis, more than 0.1% but less than 5%, the Existing Jiangsu Steam and Electricity Agreement and the 2017 Dongguan Steam and Electricity Agreement are only subject to the reporting and announcement requirements but are exempt from the circular (including independent financial advice) and shareholders' approval requirements under Chapter 14A of the Listing Rules. The relevant percentage ratios under the Listing Rules for the annual caps for the 2017 Dongguan Finished Goods Agreement are, on an annual basis, more than 0.1% but less than 5%. Accordingly, the 2017 Dongguan Finished Goods Agreement is only subject to the reporting and announcement requirements but is exempt from the circular (including independent financial advice) and shareholders' approval requirements under Chapter 14A of the Listing Rules.

* For identification purposes only

  1. THE BACKGROUND

    On 20 March 2014, Dongguan Lee & Man, an indirect wholly-owned subsidiary of the Company, entered into the Existing Dongguan Agreements with Lee & Man Manufacturing, which expired on 31 December 2016.

    On 10 February 2017, the 2017 Dongguan Finished Goods Agreement and the 2017 Dongguan Steam and Electricity Agreement were entered into between the Group and Lee & Man Manufacturing Group. Each of the 2017 Dongguan Agreements has a term of three years commencing with effect from 1 January 2017 up to and including 31 December 2019. The Company confirms that the respective aggregate transaction amounts under each of the 2017 Dongguan Agreements incurred during the period from 1 January 2017 up to the date of those agreements is below the de minimis threshold set out in Chapter 14A of the Listing Rules.

    The 2017 Dongguan Agreements constitute continuing connected transactions of the Group and further details of these agreements are set out below.

  2. THE 2017 DONGGUAN AGREEMENTS
    1. 2017 Dongguan Finished Goods Agreement

      Date: 10 February 2017

      Parties: (i) Dongguan Lee & Man (an indirect wholly-owned subsidiary of the Company)

      (ii) Lee & Man Manufacturing (an indirect wholly- owned subsidiary of a daughter of Mr Lee Wan Keung Patrick)

      Nature of Transaction: Dongguan Lee & Man (or any other member of the Group) will from time to time supply finished goods (such as test liners and corrugated medium paper) to the Lee & Man Manufacturing Group for manufacturing of corrugated paper packaging products in the PRC and the Lee & Man Manufacturing Group will from time to time supply waste paper by-products and other manufacturing materials to Dongguan Lee & Man (or any other member of the Group) for manufacturing of paper products.

      Pricing Policy: The prices to be charged by the Group in respect of the supply of finished goods are to be determined by reference to such prices chargeable by the Group to other independent customers in respect of similar products. The staff of Dongguan Lee & Man will review pricing on a monthly basis to ensure that the Group charges such price as is no more favourable to Lee & Man Manufacturing Group than it charges independent parties having taken into account (amongst other things) factors such as the order size.

      The prices to be charged to the Group in respect of its purchase of waste paper by-products and other manufacturing materials will be determined by reference to the prevailing market prices at the relevant time in respect of comparable products which will be determined by the management staff of the Lee & Man Manufacturing Group provided that the prices the Lee & Man Manufacturing Group charges the Group shall be no higher than that available to the Group from independent third party suppliers in respect of similar products. The management staff of Dongguan Lee & Man will monitor and take samples of the market prices for similar products available from independent third party suppliers on a monthly basis to ensure adherence by the Lee & Man Manufacturing Group to the pricing policy.

      Term of Agreement: 3 years commencing from 1 January 2017 till 31

      December 2019.

      Payment: The price to be charged for finished goods, waste paper by-products and other manufacturing materials will be paid in cash or by way of cheque within 30 days after the month in which the supply is made based on actual supply but subject to the limits of the New Annual Caps.

    2. 2017 Dongguan Steam and Electricity Agreement

      Date: 10 February 2017

      Parties: (i) Dongguan Lee & Man

      (ii) Lee & Man Manufacturing

      Nature of Transaction: the Group will supply steam and electricity to Lee & Man Manufacturing Group at a monthly fee based on actual usage at the rate determined as described below, subject to a maximum monthly fee of HK$666,666.

      Pricing Policy: Under the 2017 Dongguan Steam and Electricity Agreement, the steam and electricity service fees were based on the actual supply costs (including operating and financing costs of the electricity and steam generation facilities of Dongguan Lee & Man, plus a margin of not more than 5%).

      Term of Agreement: 3 years commencing from 1 January 2017 till 31

      December 2019.

      Payment: The steam and electricity charges will be paid in cash or by way of cheque by Lee & Man Manufacturing Group within 30 days after the month in which the supply is made based on actual consumption of the amount of steam and electricity but subject to the limits of the New Annual Caps.

      Considering the pricing policies as outlined above and that the respective transactions contemplated under the 2017 Dongguan Agreements will be subject to annual review by the independent non-executive Directors and the auditors of the Company, the Directors (including the independent non-executive Directors) believe that the pricing determination procedures outlined above are sufficient to ensure that the respective transactions contemplated under the 2017 Dongguan Agreements will be conducted on normal commercial terms or better and not prejudicial to the interests of the Company and its minority Shareholders.

    3. HISTORICAL AMOUNTS UNDER THE EXISTING DONGGUAN AGREEMENTS
    4. The actual consideration paid under the Existing Dongguan Agreements during the three years ended 31 December 2014, 2015 and 2016 are set out below.

      Transaction Year ended 31 December 2014 Year ended 31 December 2015 Year ended 31 December 2016

      (HK$'000) (HK$'000) (HK$'000)

      Supply of finished goods by the Group to the Lee & Man Manufacturing Group

      Purchase of waste paper by-products from the Lee & Man Manufacturing Group by the Group

      Supply of steam and electricity by the Group to the Lee & Man Manufacturing Group

      Actual consideration

      46,351 54,890 78,989

      Annual cap

      200,000 200,000 200,000

      Actual consideration

      7,733 1,780 1,914

      Annual cap

      30,000 30,000 30,000

      Actual consideration

      2,974 2,748 2,770

      Annual cap

      10,000 10,000 10,000

    Lee & Man Paper Manufacturing Ltd. published this content on 10 February 2017 and is solely responsible for the information contained herein.
    Distributed by Public, unedited and unaltered, on 10 February 2017 10:18:03 UTC.

    Original documenthttp://www.leemanpaper.com/eng/investor_relations/images/Notice2016/e_20170210 Continuing Connected Transactions.pdf

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